A No Brainer for Parents: The 529 College Savings Plan


My favorite author discovery of late is George Saunders, who just came out with a delightful book called Congratulations, by the wayIn it he urges kids to lead kinder, more fulfilling lives, with words of wisdom gleaned from ‘the failures of kindness’ in his own life. The book is the draft of a speech he made at Syracuse University’s commencement last year, and it will be my go-go graduation gift this year. Here is a 2 1/2 minute animated version of the popular speech.


Speaking of college – we all want our kids to go, but it’s easy to stick our heads in the sand and pretend that the astronomical bills that accompany that education are going to magically take care of themselves… News flash: they’re not!  The daunting price of higher education is exactly the reason to start saving for college now. In fact, the average amount of college debt that students carry in this country is $27,000. What parent wants to saddle their child with that kind of burden? The job market is going to be hard enough once they graduate.

If your employer contributes to your 401(k) plan, you’d be crazy not to take advantage of the tax savings, right? Contributing money to a 529 plan to save money for a child’s higher education is the same type of no-brainer decision.

A parent would be crazy not to do it.

I heard about a college savings vehicle called a 529 plan when my daughter was three, and my husband and I have been putting money away for college for over 18 years. Her grandparents have also made impactful contributions. Her money has grown tax-free, enough so that when her tuition bill arrives I make a withdrawal from the 529 savings account. Like a squirrel who has buried an acorn for a cold winter’s day, we feel tremendous satisfaction from being able to cover the cost of her education, and that of her younger brother, with funds that we’ve methodically saved over the years.

The benefits of compound interest and tax-free savings speak for themselves to recommend the 529 savings plans. California’s 529 plan is called ScholarShare and is one of the nine best college savings plans in the country, according to Morningstar. We did not happen to invest in California’s plan but I remember that low administrative fees were an important consideration in choosing where to invest, all those years ago.

So whether saving $25 at a time from your payroll deduction or maxing out an annual contribution, families should do their best to put money aside in this nifty savings vehicle. (Click here for an article from Reuters about strategies for super-funding these accounts). A 529 contribution is also a nice gift for family members and close friends – consider the option of donating to a niece or nephew’s college plan at the holidays instead of piling on more toys (or, as an add-on to a small gift).

The years pass quickly, as I can attest, and you can imagine the pride you will feel when watching a young man or woman don a mortarboard and march with their class on Graduation Day. Without college loans to pay off, they’ll be able to hear the wisdom of commencement speakers like George Saunders with clear hearts, and head off to make the world a better place.

Like I said… a No Brainer!


Here are some salient points to remember about 529 plans

** After tax dollars get put into the 529 savings account and grow tax free. They’re not taxed at withdrawal.

** The funds can ONLY be used for higher education, which is broadly defined as anything from graduate school and college to vocational school.

** The fund’s beneficiaries can be changed or passed along to subsequent generations.

** The money can be used for tuition, books and some room and board costs.

** Funds can be used at schools across the country or the world.

** Account holders can manage how the funds are invested over time. (ScholarShare offers 19 investment portfolios giving account holders options, depending on their savings goals and risk tolerance, and other plans should have similar choices for your investment).

** Anyone can open an account as a gift for a child or loved one. And families can make contributions to existing accounts.

This post was sponsored by ScholarShare, California’s 529 college savings plan. All opinions stated are my own.